Can an employee of Plan Sponsor be the Broker on the Plan?

[Guest SWH]

Have a plan sponsor that just changed their broker on their Fund Specific Platform 401k (not related to employer at all) to an employee that is in the Plan. I can't find anything that says that the employee is a disqualifed person, but they are a party in interest. Assuming no ownership, trustee status, etc., can the employee be the broker and/or financial advisor on a plan that he is participating in? I've never had this exact scenario before.

[Guest Sieve]

This is a PT. At a minimum, this is the providing of services between a party in interest and the plan (ERISA Section 406(a)(1)©).

But, a statutory PT exemption is available if only reasonable compensation is paid (ERISA Section 408(b)(2)). You should refer to DOL Reg. Sections 2550.408b-2 and 2550.408c-2 (and proposed regs under 408b-2©) for the rules concerning that exemption. Note, in particular, however, that a fiduciary who is receiving full-time pay from the employer sponsoring the plan (assuming the broker/financial advisor is a fiduciary) can only receive reimbursement of direct expenses (which does not include either (i) expenses that would have been sustained if the services had not been provided, or (ii) an allocable share of overhead expenses). (DOL Reg. Section 2550.408c-2(b)(3).)

I am not aware of a PT class exemption which would produce a contrary result.